Wednesday, January 2, 2019

Timothy Taylor — Macaulay on Economic Progress, 100 Years Before Keynes

Economists have long been fascinated by a 1930 essay written by John Maynard Keynes called "Economic Possibilities for Our Grandchildren" (available various places like here and here). Writing in the opening storms of what would become the Great Depression, Keynes maintained that the main issues facing the economy in the long run was an adjustment to ongoing technological progress. He wrote: "We are suffering, not from the rheumatics of old age, but from the growing-pains of over-rapid changes, from the painfulness of readjustment between one economic period and another." He added: "I would predict that the standard of life in progressive countries one hundred years hence will be between four and eight times as high as it is to-day. There would be nothing surprising in this even in the light of our present knowledge. It would not be foolish to contemplate the possibility of afar greater progress still."
That growth projection may sound crazily optimistic. But as I pointed out here, it assumes only an average annual growth rate of 1.5-2.0% per year. Seemingly slow annual rates of growth, sustained over a century, are a powerful force.
Perhaps it is well-known among the cognoscenti that Thomas Babington Macaulay, the British historian, essayist, and politician, made essentially the same claim about the power of long-run economic growth in 1830, exactly 100 years before the essay by Keynes. But I had not known it until a few weeks ago. So I'll share with you some of the Macaulay's commentary, which appeared in an 1930 review essay about "Southey's Colloquies on Society" in the Edinburgh Review. I quote here from the version of the article available at the always-useful Library of Economics and Liberty website...
Conversable Economist
Macaulay on Economic Progress, 100 Years Before Keynes
Timothy Taylor | Managing editor of the Journal of Economic Perspectives, based at Macalester College in St. Paul, Minnesota

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